Pan American Silver increases silver and gold production in the first quarter of 2014

VANCOUVER, May 8, 2014 /PRNewswire/ - Pan American Silver Corp. (NASDAQ: PAAS; TSX: PAA) (the "Company", or "Pan American"), is pleased
to report that its consolidated first quarter silver production
increased by 5% to 6.61 million ounces, while gold production rose 43%
to 45,900 ounces. At the same time, cash costs dropped 27% to $8.25
per ounce and All-in Sustaining Cost per Silver Ounce Sold "AISCSOS" (1) was reduced 20% to $15.54 per ounce. The first quarter results are on
track for the Company to achieve or surpass its consolidated forecast
for this year, particularly in relation to gold production and cash
costs.

Net cash generated from operating activities of $36.1 million, or $0.24
per share, up 12% year-on-year

Total dividends paid to common shareholders of $18.9 million

Financial Position at March 31, 2014

Cash and short term investments of $394.4 million

Working capital of $680.3 million

Long term debt of $40.3 million

(1)

All-in sustaining costs per silver ounce sold ("AISCSOS") is a non-GAAP
measure. The Company has adopted the reporting of AISCSOS as a measure
of a silver mining company's consolidated operating performance and the
ability to generate cash flow from all operations collectively. We
believe it is a more comprehensive measure of the cost of operating our
consolidated business than traditional cash and total costs per ounce
as it includes the cost of replacing ounces through exploration, the
cost of ongoing capital investments (sustaining capital), general and
administrative expenses, as well as other items that affect the
Company's consolidated earnings and cash flow. This measure including
its subcomponent Sustaining Capital are non - GAAP measures and readers
should refer to the table in the Alternative Performance (Non-GAAP)
Measures section of the MD&A for the period ending March 31, 2014 for a
reconciliation of this measure to the unaudited condensed interim
consolidated financial statements.

(2)

Financial information in this news release is based on International
Financial Reporting Standards ("IFRS"); results are unaudited;
percentages compare period-on-period.

(3)

Cash costs per payable ounce of silver, net of by-product credits, is a
non-GAAP measure. The Company believes that in addition to production
costs, depreciation and amortization, and royalties, cash costs per
ounce is a useful and complementary benchmark that investors use to
evaluate the Company's performance and ability to generate cash flow
and is well understood and widely reported in the silver mining
industry. However, cash costs per ounce does not have a standardized
meaning prescribed by IFRS as an indicator of performance. Investors
are cautioned that cash costs per ounce should not be construed as an
alternative to production costs, depreciation and amortization, and
royalties determined in accordance with IFRS as an indicator of
performance. The Company's method of calculating cash costs per ounce
may differ from the methods used by other entities and, accordingly,
the Company's cash costs per ounce may not be comparable to similarly
titled measures used by other entities. This measure is a non-GAAP
measure and readers should refer to the table in the Alternative
Performance (Non-GAAP) Measures section of the MD&A for the period
ending March 31, 2014 for a reconciliation of this measure to the
unaudited condensed interim consolidated financial statements.

(4)

Mine operating earnings is a non-GAAP measure used by the Company to
assess the performance of its silver mining operations. Mine operating
earnings is calculated as revenue less production costs, depreciation
and amortization and royalties. The Company and certain investors use
this information to evaluate the Company's performance.

(5)

Adjusted earnings and adjusted earnings per share are non-GAAP
measures. Adjusted earnings is calculated as net (loss) earnings for
the period adjusting for the gains or losses recorded on fair market
value adjustments on the Company's outstanding derivative instruments,
impairment of mineral property, unrealized foreign exchange gains or
losses, unrealized gain or loss on commodity contracts, realized and
unrealized losses on silver and gold forward contracts, severance
expense, the transaction costs arising from the Minefinders
transaction, gain or loss on sale of assets, and the effect of taxes on
the above items. The Company considers this measure to better reflect
normalized earnings as it does not include items which may be volatile
from period to period. See "Financial and Operating Highlights at the
end of this news release for a reconciliation of this measure to the
Company's Net income.

Commenting on the Company's first quarter results, Geoff Burns,
President & CEO said, "We have had a very strong start to 2014,
recording increased silver and gold production at lower than forecast
costs. The excellent production results are really just an extension of
the operating efficiencies and momentum we generated over the second
half of last year, in response to falling metal prices, and I fully
expect it to continue throughout the year. The first quarter also saw
us kick off our exciting La Colorada expansion project where we are
making good progress on the underground development needed to commence
shaft boring, while concurrently completing the detailed engineering
required for the expansion of the sulfide plant. Lastly, we are nearing
completion of the engineering work necessary to fully evaluate the
economic potential of adding a pulp agglomeration circuit and
underground mine at Dolores and we expect to release the results of
these studies near the end of the second quarter. Burns continued, "We
significantly reduced our costs in the second half of 2013 and it is
gratifying to see this trend continue into 2014."

Financial Results

Pan American generated revenue of $209.7 million during the first
quarter of 2014, 14% less than in the first quarter of last year due to
sharply lower prices for all metals produced by the Company, partially
offset by increased quantities of silver and gold sold during the
current quarter. During the quarter, Pan American's average realized
price per silver and gold ounce sold was $19.99 and $1,283,
respectively, which was significantly lower than the $30.11 per silver
ounce and $1,630 per gold ounce realized during the first quarter of
last year.

The Company generated $6.8 million in net earnings during the first
quarter of 2014, or $0.05 per share, compared to $20.1 million during
the first quarter of 2013. The decline was a result of the negative
effect of lower metals prices on revenue, higher costs of sales due to
greater quantities of metals sold, including a $2.3 million negative
adjustment on the value of inventories at Dolores, as well as a $5.5
million foreign exchange loss, predominantly on cash balances held in
Canadian dollars.

Adjusted earnings for the reporting quarter were $8.6 million or $0.06
per share, compared to $40.0 million in the first quarter of 2013.

Mine operating earnings during the first three months of 2014 fell 58%
from the same period of 2013 to $31.6 million. Again, this decline was
a direct result of lower metals prices and higher depreciation on
increased volumes sold.

During the first three months of 2014, the Company generated $36.1
million in cash flow from operations, 12% more than in the comparable
period of 2013. The increase resulted from lower income taxes paid and
changes in non-cash operating working capital, partially offset by
lower mine operating earnings.

During the first quarter of 2014, Pan American paid $18.9 million in
cash dividends to common shareholders.

Pan American maintains one of the strongest balance sheets in the
industry. At March 31, 2014, the Company had $394.4 million in cash
and short-term investments, and working capital of $680.3 million, a
decrease of $28.3 million and $8.7 million, respectively as compared to
the fourth quarter of 2013. Long-term debt was relatively unchanged at
$40.3 million.

Operating Results

During the first quarter of 2014, Pan American produced a total of 6.61
million ounces of silver, 5% more than was produced during the first
quarter of 2013. The increase was achieved due to production gains at
all of the Company's operations, except for Alamo Dorado. Substantial
production increases at Dolores, La Colorada and Manantial Espejo were
more than enough to offset the decline at Alamo Dorado.

Consolidated gold production for the first quarter of 2014 climbed to
45,900 ounces, a 43% increase as compared to the first quarter of
2013. The increase was attributable to a 13% rise in gold production
at Dolores, which contributed 16,400 ounces, and an 88% rise in gold
ounces from Manantial Espejo, where production increased to 24,500
ounces due to higher grades and higher throughput.

Quarterly consolidated zinc, lead and copper production was also higher
compared to a year ago as a result of higher throughput rates and
grades at La Colorada, Morococha, Huaron and San Vicente. Zinc
production rose 18% to 11,400 tonnes, lead production rose 16% to 3,600
tonnes and copper production rose 55% to 1,700 tonnes.

Mexico

La Colorada had a record first quarter, producing 1.2 million ounces of
silver, 8% higher than a year ago. The mine achieved higher throughput
and processed higher grades as accelerated mine development for the
mine expansion project begins to provide more access to higher grade
sulphide ore, deeper in the mine. Grades for all base metals are also
improving as mining operations progress to lower levels.

Quarterly silver production at Dolores rose 23% from the first quarter
of 2013 to 1.01 million ounces, a quarterly record for the mine. The
increase was achieved on higher throughput rates and a marked
improvement in recovery rates due to longer primary leach cycle times
obtained with the commissioning of Pad 3 in late 2013. In addition,
incremental production was achieved by bringing a staged leaching
sequence into operation on Pad 2 and Pad 3 during the quarter. Overall
recovery rates are expected to trend downwards over the coming months
as the benefits of staged leaching begin to decrease and recoveries
fall to the mine's modelled recovery rates towards year-end.

Alamo Dorado's silver production during the first three months of 2014
fell short of management's expectations at 0.91 million ounces of
silver, 28% lower than in the first quarter of 2013. The production
decline resulted from the combination of an unscheduled 15-day stoppage
to repair a failed mill motor and expected lower head grades as the
plant begins to process lower grade ore being mined and a higher
proportion of lower grade stockpiled ore.

Peru

Huaron produced 0.83 million ounces of silver during the first quarter,
a 10% increase from the first quarter of 2013, as the mine sustained
the higher throughput rates achieved last year in addition to
benefitting from better recoveries, which more than compensated for
slightly lower than expected grades.

Quarterly silver production at Morococha rose to 0.59 million ounces
from 0.52 million ounces a year ago. The increase was due to higher
grades obtained through mine development initiatives put into place
last year.

Bolivia

San Vicente's quarterly silver production rose to 1.0 million ounces, 7%
more than in the first quarter of 2013. The increase was due to
encountering higher-than-expected silver grades, which made up for
slightly lower recoveries as compared to a year ago.

Argentina

Manantial Espejo's silver production rose significantly to 1.03 million
ounces, 25% higher than in the first quarter of 2013. The production
increase was achieved with higher throughput, higher grades, and a
drawdown of in-process inventories while the processing plant was down
for scheduled maintenance work. Throughput increased as the relaxation
of importation restrictions greatly improved the supply of critical
spare parts, which are starting to catch up to operational needs.
Higher grades were achieved from the open pit mine sequencing that
accessed the final benches of the Phase 1 Maria open pit, which was
mined out in the quarter. We do not anticipate seeing similar high
grade ores from the open pit until year-end, as pre-stripping of the
Phase 2 Maria open pit will advance through the next two quarters.

All-in Sustaining Costs Per Silver Ounce Sold

AISCSOS for the first quarter of 2014 was reduced 20% to $15.54 from
$19.47 in the first quarter of 2013. The decline was attributable to
significantly higher by-product credits due to more quantities of
metals sold, more favourable treatment and refining terms for the
Company and the continuation of cost-cutting measures implemented last
year. More importantly, continuing the trend established last year,
AISCSOS for the first quarter of this year fell 9% as compared to the
fourth quarter of 2013. For a full reconciliation of AISCSOS
calculation, please refer to the section "Alternative Performance
(Non-GAAP) Measures" of the Company's MD&A for the period ended March
31, 2014.

Consolidated Cash Costs

Pan American's cost-cutting and productivity enhancement initiatives
introduced last year continue to reduce the Company's unit operating
costs. For the first quarter of 2014, Pan American's seven mining
operations reported consolidated cash costs of $8.25 per ounce of
silver, net of by-product credits, a 27% decrease from cash costs
reported during the first quarter of 2013 and 14% lower than cash costs
recorded in the fourth quarter of 2013. The cost reduction was
achieved due to the positive effect of higher by-product credits on
more quantities of by-products sold, which were partly offset by lower
by-product prices, and lower operating costs mostly attributable to
lower smelting costs and royalties. Please refer to the section
"Alternative Performance (Non-GAAP) Measures" of the Company's MD&A for
the period ended March 31, 2014 for a full description of this non-GAAP
measure.

Sustaining Capital

During the first quarter of 2014, Pan American spent $24.7 million in
sustaining capital at its seven operating mines. The largest
expenditures were incurred at: Manantial Espejo, where $8.4 million was
spent mainly on pre-stripping of the Maria Phase 2 open pit and an
expansion of the tailings dam; at Dolores, where $6.4 million was spent
mainly on pre-stripping, access road construction and exploration; at
Huaron, where $3.1 million was spent on upgrades to the ventilation
systems and equipment, camp infrastructure, exploration, and roads; and
at La Colorada, where $2.9 million was spent on development drilling,
equipment replacement and near-mine exploration. In addition, $1.8
million was spent primarily on mine development at Morococha and $0.8
million was spent at San Vicente for equipment and infrastructure
upgrades.

Projects

La Colorada Expansion

The La Colorada expansion project was initiated in January 2014. During
the first quarter of 2014, work progressed as planned with expenditures
of $3.6 million, predominantly on lateral and ramp underground
development, underground equipment purchases, and construction related
to raising the tailings dam. We continue to pre-qualify contractors,
and expect to award contracts for the new shaft development and the
plant expansion within the upcoming months.

Dolores

Work on phase two of Dolores' leach Pad 3 development advanced as
planned during the first quarter of 2014, with ore stacking and
leaching in the lower portions of the pad progressing concurrently with
the lining of benches 3, 4, and 5. The new solution pumping system was
commissioned early in the year, allowing solution flow from Pad 2 to
Pad 3, thus enriching the leachate solution with metals prior to being
pumped to the Merrill Crowe plant for gold and silver recovery. We
expect to complete lining up to bench 5 prior to year-end, thereby
providing sufficient stacking capacity for ore storage and leaching on
Pad 3 until the middle of 2017.

In addition, the design of the new power line to connect the operation
with Chihuahua's grid power was approved, and the Company is now
engaged in negotiations for right of way agreements with land owners,
as well as working on an environmental assessment for the new 108 km
power line.

Work continued to determine the benefits of a milling and pulp
agglomeration option and underground mine at Dolores. A review of the
initial plant design was completed during the first quarter of 2014,
with work currently focusing on updating the capital and operating
costs estimates, conducting a thorough review of mine plan alternatives
to optimize the overall mineral resource, and the evaluation of whether
there are any economic benefits to adding an underground option which
would access existing resources below the ultimate pit floor.

Commenting on the Company's operational performance, Steve Busby, Chief
Operating Officer, said, "Our first quarter performance has given us a
solid start to the year, with production on target, costs below
expectations and our exciting La Colorada expansion project already
well underway. We continue to focus on finding sustainable ways to
further bolster our business in the current metal price environment
through identifying additional cost-cutting and productivity enhancing
initiatives, advancing on our high-return mine-site projects and
investigating a host of other mine-site expansion opportunities. This
is an exciting time for Pan American as our teams are extremely
energized and focused on expanding on our recent successes at unlocking
additional value for our stakeholders."

Pan American Recognized as a Leader in Sustainability

Pan American is pleased to announce that it has been ranked 19th out of over 200 Canadian companies in Corporate Knights: The Future 40 Responsible Corporate Leaders in Canada. This ranking acknowledges the many years of effort that the Company
has dedicated to sustainable development through its social, economic
and environmental programs.

"Sustainable development has always been one of Pan American's core
values. It is rewarding to see that our hard work has been recognized
by the Corporate Knights organization. Creating a sustainable future
is a goal we share with our employees, our local communities,
governments, industry groups, and non-government partners who are
instrumental in our success." said Geoff Burns, President and CEO of
Pan American Silver.

The Company recently released its fifth annual Sustainability Report,
based on the Global Reporting Initiative - G4 guidelines. Copies of
Pan American's 2013 Sustainability Report are available at www.panamericansilver.com

With silver and gold production during the first quarter of 2014 at, or
above Company expectations and with costs that were lower than
expected, the Company remains confident that it will achieve or surpass
its forecast for precious metals production (particularly gold), as
well as likely be closer to the low end of annual guidance for AISCSOS
and cash costs (provided metal prices remain near current levels). Pan
American confirms guidance of annual consolidated production of 25.75
to 26.75 million ounces of silver and 155,000 to 165,000 ounces of gold
at AISCSOS of $17.00 to $18.00 and cash costs of $11.70 to $12.70 per
silver ounce, net of by-product credits.

The Company also confirms its forecast for 2014 annual sustaining
capital of $95.5 million and project investment capital of $67.0
million.

About Pan American

Pan American Silver's mission is to be the world's pre-eminent silver
producer, with a reputation for excellence in discovery, engineering,
innovation and sustainable development. The Company has seven
operating mines in Mexico, Peru, Argentina and Bolivia. Pan American
also owns several development projects in the USA, Mexico, Peru and
Argentina.

Technical information contained in this news release with respect to Pan
American has been reviewed by Michael Steinmann, P.Geo., Executive VP
Corporate Development & Geology, and Martin Wafforn, P.Eng., VP
Technical Services, who are the Company's Qualified Persons for the
purposes of NI 43-101.

Pan American will host a conference call to discuss these results on
Friday, May 9, 2014 at 10:00 am EST (7:00 am PST). To participate in
the conference please dial toll number 1+ 604-638-5340. A live audio
webcast and presentation will be available at http://services.choruscall.ca/links/pan140509.html. The call and webcast will also be available for replay for one week
after the call by dialing 1-604-638-9010 and entering code # 6218
followed by the # sign.

Non-GaAP Measure - Cash costs per ounce, NET OF BY-PRODUCT CREDITS

THIS NEWS RELEASE PRESENTS INFORMATION ABOUT OUR CASH COSTS OF
PRODUCTION OF AN OUNCE OF SILVER FOR OUR OPERATING MINES. CASH COSTS
PER OUNCE PRODUCED, NET OF BY-PRODUCT CREDITS IS CALCULATED AS FOLLOWS:

EXCEPT AS OTHERWISE NOTED, CASH COSTS PER OUNCE PRODUCED IS CALCULATED
BY DIVIDING TOTAL CASH COSTS, NET OF BY-PRODUCT CREDITS BY TOTAL SILVER
OUNCES PRODUCED AT THE RELEVANT MINE OR MINES.

TOTAL CASH COSTS INCLUDE MINE OPERATING COSTS SUCH AS MINING,
PROCESSING, ADMINISTRATION, ROYALTIES AND OPERATING TAXES, BUT EXCLUDE
AMORTIZATION, RECLAMATION COSTS, FINANCING COSTS AND CAPITAL
DEVELOPMENT AND EXPLORATION. CERTAIN AMOUNTS OF STOCK-BASED
COMPENSATION ARE EXCLUDED AS WELL.

CASH COST PER OUNCE OF SILVER PRODUCED, NET OF BY-PRODUCT CREDITS IS
INCLUDED IN THIS NEWS RELEASE BECAUSE CERTAIN INVESTORS USE THIS
INFORMATION TO ASSESS OUR PERFORMANCE AND ALSO TO DETERMINE OUR ABILITY
TO GENERATE CASH FLOW FOR USE IN INVESTING AND OTHER ACTIVITIES. THE
INCLUSION OF CASH COSTS PER OUNCE PRODUCED MAY ENABLE INVESTORS TO
BETTER UNDERSTAND YEAR-OVER-YEAR CHANGES IN OUR PRODUCTION COSTS, WHICH
IN TURN AFFECT PROFITABILITY AND CASH FLOW. CASH COSTS PER OUNCE, NET
OF BY-PRODUCT CREDITS DOES NOT HAVE A STANDARDIZED MEANING OR A
CONSISTENT BASIS OF CALCULATION PRESCRIBED BY CANADIAN ACCOUNTING
STANDARDS. INVESTORS ARE CAUTIONED THAT CASH COSTS PER OUNCE PRODUCED,
NET OF BY-PRODUCTCREDITS SHOULD NOT BE CONSIDERED IN ISOLATION OR CONSTRUED AS A
SUBSTITUTE TO COSTS DETERMINED IN ACCORDANCE WITH CANADIAN ACCOUNTING
STANDARDS AS PRESCRIBED UNDER IFRS AS AN INDICATOR OF PERFORMANCE. OUR
METHOD OF CALCULATING CASH COSTS PER OUNCE PRODUCED, NET OF BY-PRODUCT
CREDITS MAY DIFFER FROM THE METHODS USED BY OTHER ENTITIES AND,
ACCORDINGLY, OUR CASH COSTS PER OUNCE PRODUCED MAY NOT BE COMPARABLE TO
SIMILARLY TITLED MEASURED USED BY OTHER ENTITIES.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN OF THE STATEMENTS AND INFORMATION IN THIS NEWS RELEASE
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND
"FORWARD-LOOKING INFORMATION" WITHIN THE MEANING OF APPLICABLE CANADIAN
PROVINCIAL SECURITIES LAWS. ALL STATEMENTS, OTHER THAN STATEMENTS OF
HISTORICAL FACT, ARE FORWARD-LOOKING STATEMENTS OR INFORMATION.
FORWARD-LOOKING STATEMENTS OR INFORMATION IN THIS NEWS RELEASE RELATE
TO, AMONG OTHER THINGS: OUR ESTIMATED PRODUCTION OF SILVER, GOLD AND
OTHER METALS IN 2014; OUR FORECAST CASH COSTS PER OUNCE OF SILVER IN
2014; OUR ESTIMATED AISCSOS FOR 2014; OUR ANTICIPATED CAPITAL
INVESTMENTS FOR 2014; THE ABILITY OF THE COMPANY TO SUCCESSFULLY
COMPLETE ANY CAPITAL INVESTMENT PROGRAMS AND PROJECTS AND THE IMPACTS
OF ANY SUCH PROGRAMS AND PROJECTS ON THE COMPANY; THE COMPLETION AND
ANTICIPATED RESULTS OF ANY TECHNICAL REPORTS OR OTHER EVALUATIONS; AND
ANY ANTICIPATED LEVEL OF FINANCIAL AND OPERATIONAL SUCCESS IN 2014.

THESE STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO
FUTURE EVENTS AND ARE NECESSARILY BASED UPON A NUMBER OF ASSUMPTIONS
THAT, WHILE CONSIDERED REASONABLE BY THE COMPANY, ARE INHERENTLY
SUBJECT TO SIGNIFICANT OPERATIONAL, BUSINESS, ECONOMIC AND REGULATORY
UNCERTAINTIES AND CONTINGENCIES. THESE ASSUMPTIONS INCLUDE: TONNAGE OF
ORE TO BE MINED AND PROCESSED; ORE GRADES AND RECOVERIES; PRICES FOR
SILVER, GOLD AND BASE METALS; CAPITAL, DECOMMISSIONING AND RECLAMATION
ESTIMATES; OUR MINERAL RESERVE AND RESOURCE ESTIMATES AND THE
ASSUMPTIONS UPON WHICH THEY ARE BASED; PRICES FOR ENERGY INPUTS,
LABOUR, MATERIALS, SUPPLIES AND SERVICES (INCLUDING TRANSPORTATION); NO
LABOUR-RELATED DISRUPTIONS AT ANY OF OUR OPERATIONS: NO UNPLANNED
DELAYS IN OR INTERRUPTIONS IN SCHEDULED PRODUCTION; ALL NECESSARY
PERMITS, LICENCES AND REGULATORY APPROVALS FOR OUR OPERATIONS ARE
RECEIVED IN A TIMELY MANNER; AND OUR ABILITY TO COMPLY WITH
ENVIRONMENTAL, HEALTH AND SAFETY LAWS. THE FOREGOING LIST OF
ASSUMPTIONS IS NOT EXHAUSTIVE.

THE COMPANY CAUTIONS THE READER THAT FORWARD-LOOKING STATEMENTS AND
INFORMATION INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER
FACTORS THAT MAY CAUSE ACTUAL RESULTS AND DEVELOPMENTS TO DIFFER
MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS OR INFORMATION CONTAINED IN THIS NEWS RELEASE AND THE
COMPANY HAS MADE ASSUMPTIONS AND ESTIMATES BASED ON OR RELATED TO MANY
OF THESE FACTORS. SUCH FACTORS INCLUDE, WITHOUT LIMITATION:
FLUCTUATIONS IN SILVER, GOLD AND BASE METALS PRICES; FLUCTUATIONS IN
PRICES FOR ENERGY INPUTS, LABOUR, MATERIALS, SUPPLIES AND SERVICES
(INCLUDING TRANSPORTATION); FLUCTUATIONS IN CURRENCY MARKETS (SUCH AS
THE CANADIAN DOLLAR, PERUVIAN SOL, MEXICAN PESO AND BOLIVIAN BOLIVIANO
VERSUS THE U.S. DOLLAR); OPERATIONAL RISKS AND HAZARDS INHERENT WITH
THE BUSINESS OF MINING (INCLUDING ENVIRONMENTAL ACCIDENTS AND HAZARDS,
INDUSTRIAL ACCIDENTS, EQUIPMENT BREAKDOWN, UNUSUAL OR UNEXPECTED
GEOLOGICAL OR STRUCTURAL FORMATIONS, CAVE-INS, FLOODING AND SEVERE
WEATHER); RISKS RELATING TO THE CREDIT WORTHINESS OR FINANCIAL
CONDITION OF SUPPLIERS, REFINERS AND OTHER PARTIES WITH WHOM THE
COMPANY DOES BUSINESS; INADEQUATE INSURANCE, OR INABILITY TO OBTAIN
INSURANCE, TO COVER THESE RISKS AND HAZARDS; EMPLOYEE RELATIONS;
RELATIONSHIPS WITH, AND CLAIMS BY, LOCAL COMMUNITIES AND INDIGENOUS
POPULATIONS; OUR ABILITY TO OBTAIN ALL NECESSARY PERMITS, LICENSES AND
REGULATORY APPROVALS IN A TIMELY MANNER;CHANGES IN LAWS, REGULATIONS
AND GOVERNMENT PRACTICES IN THE JURISDICTIONS WHERE WE OPERATE,
INCLUDING ENVIRONMENTAL, EXPORT AND IMPORT LAWS AND REGULATIONS;
DIMINISHING QUANTITIES OR GRADES OF MINERAL RESERVES AS PROPERTIES ARE
MINED; INCREASED COMPETITION IN THE MINING INDUSTRY FOR EQUIPMENT AND
QUALIFIED PERSONNEL; AND THOSE FACTORS IDENTIFIED UNDER THE CAPTION
"RISKS RELATED TO PAN AMERICAN'S BUSINESS" IN THE COMPANY'S MOST RECENT
FORM 40-F AND ANNUAL INFORMATION FORM FILED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION AND CANADIAN PROVINCIAL SECURITIES
REGULATORY AUTHORITIES. ALTHOUGH THE COMPANY HAS ATTEMPTED TO IDENTIFY
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY,
THERE MAY BE OTHER FACTORS THAT CAUSE RESULTS NOT TO BE AS ANTICIPATED,
ESTIMATED, DESCRIBED OR INTENDED. INVESTORS ARE CAUTIONED AGAINST
UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS AND INFORMATION.
FORWARD-LOOKING STATEMENTS AND INFORMATION ARE DESIGNED TO HELP READERS
UNDERSTAND MANAGEMENT'S CURRENT VIEWS OF OUR NEAR AND LONGER TERM
PROSPECTS AND MAY NOT BE APPROPRIATE FOR OTHER PURPOSES. THE COMPANY
DOES NOT INTEND, NOR DOES IT ASSUME ANY OBLIGATION TO UPDATE OR REVISE
FORWARD-LOOKING STATEMENTS AND INFORMATION, WHETHER AS A RESULT OF NEW
INFORMATION, CHANGES IN ASSUMPTIONS, FUTURE EVENTS OR OTHERWISE, EXCEPT
TO THE EXTENT REQUIRED BY APPLICABLE LAW.

Pan American Silver Corp.

Financial & Operating Highlights

Three months ended March 31,

2014

2013

Consolidated Financial Highlights

(Unaudited in thousands of U.S. Dollars)

Net earnings for the period

$

6,760

$

20,076

Earnings per share attributable to common shareholders (basic)

$

0.05

$

0.13

Adjusted earnings for the period(1)

$

8,554

$

39,972

Adjusted earnings per share (basic)(1)

$

0.06

$

0.26

Mine operating earnings

$

31,576

$

74,816

Net cash generated from operating activities

$

36,125

$

32,251

Operating cash flows before changes in non-cash operating working
capital(3)

$

36,122

$

45,297

Capital spending

$

36,811

$

39,693

Dividends paid

$

18,940

$

19,021

Shares repurchased

$

-

$

5,442

Cash and short-term investments

$

394,381

$

490,146

Working capital(2)

$

680,318

$

738,379

Consolidated Metals Recovered

Silver metal - million ounces

6.61

6.28

Gold metal - thousand ounces

45.9

32.1

Zinc metal - thousand tonnes

11.4

9.7

Lead metal - thousand tonnes

3.6

3.1

Copper metal - thousand tonnes

1.7

1.1

Average Realized Price

Silver metal ($/oz)

$

19.99

$

30.11

Gold metal ($/oz)

$

1,283

$

1,630

Consolidated Cost per Ounce of Silver (net of by-product credits)(3)

Cash cost per ounce

$

8.25

$

11.33

Total production cost per ounce

$

14.93

$

17.29

Millions of Payable ounces of silver (used in cost per ounce
calculations)

Adjusted earnings and adjusted earnings per share attributable to common
shareholders are non-GAAP measures. Adjusted earnings is calculated as
net (loss) earnings for the period adjusting for the gains or losses
recorded on fair market value adjustments on the Company's outstanding
derivative instruments, impairment of mineral property, unrealized
foreign exchange gains or losses, unrealized gain or loss on commodity
contracts, realized and unrealized losses on silver and gold forward
contracts, severance expense, the transaction costs arising from the
Minefinders transaction, gain or loss on sale of assets, and the effect
for taxes on the above items. The Company considers this measure to
better reflect normalized earnings as it does not include items which
may be volatile from period to period.

Three months ended March 31,

Adjusted Earnings Reconciliation

2014

2013

Net earnings for the period

$

6,760

$

20,076

Adjust derivative losses

99

2,649

Adjust unrealized foreign exchange losses

1,704

4,327

Adjust realized and unrealized on commodity contracts

-

(1,268)

Adjust gain on sale of mineral properties

(6)

(4,068)

Adjust write-down of mining assets

-

19,339

Adjust for effect of taxes on above items

(3)

(1,083)

Adjusted earnings for the period

$

8,554

$

39,972

Weighted average shares for the period

151,500

151,760

Adjusted earnings per share for the period

$

0.06

$

0.26

(1)

Adjusted earnings and adjusted earnings per share attributable to common
shareholders are non-GAAP measures. Adjusted earnings is calculated as
net (loss) earnings for the period adjusting for the gains or losses
recorded on fair market value adjustments on the Company's outstanding
derivative instruments, impairment of mineral property, unrealized
foreign exchange gains or losses, unrealized gain or loss on commodity
contracts, realized and unrealized losses on silver and gold forward
contracts, severance expense, the transaction costs arising from the
Minefinders transaction, gain or loss on sale of assets, and the effect
for taxes on the above items. The Company considers this measure to
better reflect normalized earnings as it does not include items which
may be volatile from period to period.

(2)

Working capital is a non-GAAP measure calculated as current assets less
current liabilities. The Company and certain investors use this
information to evaluate whether the Company is able to meet its current
obligations using its current assets.

(3)

Consolidated cash cost per ounce of silver is a non-GAAP measure. The
Company believes that in addition to production costs, depreciation and
amortization, and royalties, cash cost per ounce is a useful and
complementary benchmark that investors use to evaluate the Company's
performance and ability to generate cash flows and is well understood
and widely reported in the silver mining industry. However, cash cost
per ounce does not have a standardized meaning prescribed by IFRS as an
indicator of performance. Investors are cautioned that cash costs per
ounce should not be construed as an alternative to production costs,
depreciation and amortization, and royalties determined in accordance
with IFRS as an indicator of performance. The Company's method of
calculating cash costs per ounce may differ from the methods used by
other entities.

(4)

The Company has adopted the reporting of All-In Sustaining Costs per
Silver Ounce Sold ("AISCSOS") as a measure of a silver mining company's
consolidated operating performance and the ability to generate cash
flow from all operations collectively. We believe it is a more
comprehensive measure of the cost of operating our consolidated
business than traditional cash and total costs per ounce as it includes
the cost of replacing ounces through exploration, the cost of ongoing
capital investments (sustaining capital), general and administrative
expenses, as well as other items that affect the Company's consolidated
earnings and cash flow.